The cross-border e-commerce brand SHEIN, once valued as high as a trillion dollars, has recently gained attention due to the IPO process and involvement in copyright disputes.
Despite several official denials from SHEIN regarding the IPO-related news, rumors of its listing have persisted since 2023. According to previous reports from Upstream News, uncertainties may arise in SHEIN’s plan for a U.S. listing, prompting the company to adopt multiple strategic measures to overcome potential obstacles.
Simultaneously, SHEIN is involved in copyright disputes. The latest news, as reported by The Paper, reveals that on January 16th, Fast Retailing Co., the parent company of UNIQLO, announced on its official website that UNIQLO had filed a lawsuit with the Tokyo District Court on December 28, 2023, against three entities under the retail brand SHEIN, including SHEIN Japan.
However, on the flip side, SHEIN’s performance continues to grow. An industry insider revealed that SHEIN’s revenue has exceeded $30 billion in 2023.
The rise of “Four Little Dragons” in the international market has intensified competition in the cross-border e-commerce sector. As a leading player in this field, SHEIN faces increasing challenges and cannot afford to rest on its laurels.
Accelerated Expansion Year
By the end of 2023, rumors of SHEIN’s IPO surfaced again. According to a report, SHEIN secretly filed for a U.S. IPO with a target valuation of $90 billion. It has invited investors to participate in roadshows and has already completed submissions. SHEIN responded to several media interviews, stating that the information is inaccurate. However, SHEIN has been accelerating its expansion and promoting internationalization.
Firstly, SHEIN has assembled a team with an international perspective and capital knowledge to support its global ambitions. In October of 2022, SHEIN announced the appointment of Marcelo Claure, former CEO of SoftBank Group, as Vice Chairman. Claure was once a key figure alongside. Masayoshi Son, during his tenure at SoftBank, was known for successfully turning around companies invested in by SoftBank. Tang Wei, who previously served as Chairman and CEO of Bear Stearns Asia and facilitated Wanda Group’s $2.6 billion acquisition of the AMC theater chain, also garnered attention.
Secondly, SHEIN is actively advancing its international layout. As a cross-border fast-fashion e-commerce brand founded in Nanjing in 2008, SHEIN expanded its team in Singapore starting in 2022, increasing the number of employees.
Furthermore, SHEIN is transforming into an open platform, initially focused on women’s fashion, expanding to cover all categories and entering into direct competition with Amazon in the North American market.
Lastly, SHEIN has initiated an acquisition strategy. In late August of the previous year, SHEIN acquired a one-third stake in SPARC Group, a U.S. apparel brand operator. SPARC Group owns multiple clothing brands, including fast-fashion women’s brand Forever 21, outdoor brand Nautica, and mid-range men’s brand Brooks Brothers. At the end of October, SHEIN acquired the fast-fashion brand Missguided and all its intellectual property rights from the British fashion retail group Frasers Group.
After exploring various business formats, SHEIN has also entered the second-hand clothing trading market. SHEIN will launch the SHEIN Exchange in Europe, initially going live in France and Germany. It is evident that over the past year, SHEIN has been rapidly exploring new models to seek new growth opportunities.
Small Orders, Fast Reorders: Changes in the Supply Chain Dividend
In the “small orders, fast reorders” model, many factories collaborating with SHEIN make substantial profits. However, with the further development of SHEIN, suppliers are showing different situations.
Suppliers are choosing to reduce SHEIN’s orders or even withdraw. For example, a supplier has collaborated with SHEIN for five years using the ODM (Original Design Manufacturer) cooperation model, where the supplier independently designs, develops, and produces according to orders. The current dilemma is the decline in orders, making business difficult.
The “small orders, fast reorders” model tests the supplier’s ability to integrate upstream and downstream resources. Take a factory in Guangdong as an example. SHEIN usually places orders for 100 to 200 pieces for small-scale production testing. However, the factory must purchase raw materials in bulk, starting from 1 to 2 tons. This implies that a style that fails to become a bestseller leads to excess raw material inventory challenges. The higher quality product requirements and the intensified price competition also pressure the suppliers’ profits.
The “small orders, fast reorders” model also tests how factories can keep up with SHEIN’s fast-paced production. If there is a popular product, the factory may need help to meet the timely stocking demand, such as when plus-size shoes become bestsellers, but the existing plus-size molds in the factory cannot meet production needs. Then, SHEIN demands high efficiency. One supplier admits that during the three years of cooperation with SHEIN, the initial timeframe was relatively relaxed. However, now it takes five days from pattern design to delivery, adding constant pressure for factories in the footwear category.
The Challenges
In the development process of SHEIN, the rapid growth also faces more challenges.
One challenge is that SHEIN has repeatedly been involved in plagiarism disputes during rapid new product launches. According to public records, SHEIN has been listed as a defendant in at least 50 federal lawsuits in the United States, accusing it of trademark or copyright infringement in the past four years. As of July 2022, SHEIN faces over 100 million dollars claims due to plagiarism.
Since 2021, SHEIN has initiated the “SHEIN X” designer incubation project, where SHEIN X designers are only responsible for creating, while SHEIN handles manufacturing, marketing, and sales. Designers can share profits and retain ownership of their creations. As of September 2023, SHEIN has announced an additional investment of 50 million dollars in the SHEIN X designer incubator program, bringing the total investment to 105 million dollars, completed by 2028.
Another challenge is the issue of Environmental, Social, and Governance (ESG). The fast fashion industry is changing, with brands such as ZARA and Uniqlo beginning to use biodegradable fabrics, adopt energy-saving and emission-reducing manufacturing processes, and use more environmentally friendly paper packaging.
SHEIN is currently continuously improving its ESG capabilities. Last year, SHEIN announced an investment of over 1 billion yuan (155 million dollars) within five years to advance the critical project “Equitable Empowerment” under its sustainable development strategy “evoluSHEIN.” This initiative aims to support the development of designers, suppliers, women, youth, and vulnerable communities in various global communities.